Good day, ladies and gentlemen, and welcome to the Clearwire Corporation Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host for today, Ms. Alice Ryder, Vice President of Investor Relations. Ma'am, please go ahead.

Alice Ryder

Thank you, Karen. Good afternoon, and welcome to Clearwire's Third Quarter 2012 Financial Results Conference Call. With me today are Erik Prusch, Clearwire's President and Chief Executive Officer; and Hope Cochran, our Chief Financial Officer. John Saw, our Chief Technology Officer, is also available for the question-and-answer session.

Today's call is being webcast live on the Clearwire Investor Relations website and will be archived on that site and available for replay shortly after we conclude. Unless otherwise mentioned where applicable, all sequential comparisons in today's discussion reference second quarter -- third quarter 2012 financial measures and all year-over-year comparisons reference -- I'm sorry, all sequential comparisons for today's discussion reference second quarter 2012 financial measures and all year-over-year comparisons reference third quarter 2011 financial measures.

These forward-looking statements are all based on currently available operating financial and competitive information and are subject to various risks and uncertainties. Listeners are cautioned not to put undue reliance on any forward-looking statements as they are not a guarantee of future performance.

Please refer to our press release and our filings with the SEC for more information concerning risk factors that could cause actual results to differ materially from those in the forward-looking statements. The company assumes no obligation to update any of these statements.

Finally, all mentions of EBITDA on this call reference adjusted EBITDA as defined in our press release where listeners may find definitions and reconciliations for all non-GAAP measures discussed today.

And all mentions of retail cash contribution represent retail revenue, less cost of goods and services sold to retail customers; G&A expenses, such as customer care, bad debt and sales and marketing expenses and CapEx related to leased CPE under our original retail model.

I will now turn the call over to Erik Prusch.

Erik E. Prusch

Thank you, Alice. Good afternoon, everyone. I'm pleased to be with you today in the midst of a very interesting few weeks in the wireless business. Before we get to our results, I'd like to address a topic that is undoubtedly on all of your minds, our relationship with Sprint and the effect of their recent agreements with SoftBank and Eagle River.

First, I want to congratulate SoftBank and Sprint on the recent announcement. We have a long history of working with SoftBank as cofounders of the global TDD-LTE initiative, TTI, and believe their enthusiasm for 2.5 gigahertz spectrum and TDD-LTE is extremely positive. We have great respect for what they have accomplished with TDD-LTE and believe the commonality between our 2 networks, both in terms of the TDD flavor of LTE and the 2.5 gigahertz band, will continue to drive a productive relationship.

We believe we are well aligned with SoftBank and that we both have a deep appreciation for the data opportunity in the United States and the desire to leverage our network capabilities and fast data speed to be a disruptive force in the industry to drive innovation, rapid revenue growth and long-term shareholder value.

We believe their acquisition of Sprint is a clear sign that Clearwire's unmatched spectrum position makes us a significant and valuable solution to the industry's growing need for 4G network capacity.

In addition, Sprint has historically been capital constrained versus the other national players, and we believe a stronger balance sheet and greater financial flexibility will make them more successful. As Sprint is our largest customer, we believe that bodes well for Clearwire.

With respect to the recent transaction between Sprint and Eagle River, specifically, I want to address some of the misperceptions about Sprint's increased stake and boding interest in Clearwire. I want to be crystal clear, Sprint has not gained any additional governance rights or board seats through their agreement to purchase Eagle River shares. The strategic investor group board seats and governance rights do not transfer when shares are sold. Of course, this means that Sprint wouldn't be able to gain additional governance rights even if they purchase the equity held by our other strategic investors.

If Sprint concludes the purchase of Eagle River shares in Clearwire, Sprint designated board seats will continue to be 7 seats. All 7 are currently filled by independent directors in part due to the 2010 decision by Sprint's management to step down from the board as a result of antitrust concerns. In fact, our entire board consists of independent directors, with the exception of me, due to my role as CEO.

The only change is that the Eagle River seat, which I hold, will be returned to the governance and nominating committee for the appointment of an independent director. As a result, Sprint will no longer be required to appoint an independent director to fill the seat presently occupied by the Chairman of the Board, John Stanton.

Of course, regardless of who appoints them, all of our directors in serving as public company directors continue to be bound by duties of loyalty and care and have fiduciary responsibly to all of our shareholders. Our commitment to the long-standing relationship we have with Sprint also has not changed, and we believe we continue to be integral to their future strategy and success.

With Sprint having access to a 5 plus 5 layer of spectrum to support their LTE network for the next few years, we believe our LTE network will enable Sprint to maintain their truly unlimited market positioning by offering customers the experience they desire. This is more important now than ever with users' behaviors becoming increasingly mobile, new devices having more capabilities and as a result, consuming more data, especially in light of SoftBank's stated desire for speed.

We believe Clearwire is best positioned to meet these burgeoning demand with our 160 megahertz on average spectrum in the top 100 markets, giving us the ability to deploy multiple 20 megahertz channels and when available, LTE-advanced performance with 40 megahertz channels.

We are energized by the opportunity to unlock the value of our deep spectrum resources and continue to work collaboratively with Sprint on constructing our LTE network to provide Sprint, as well as Leap and other potential LTE partners with a high-speed data capacity their customers desire.

Before I move on to our results, I want to address some questions we've been getting about whether Sprint will need to consolidate Clearwire given their ownership will exceed 50% following the purchase of shares held by Eagle River. This is not a Clearwire issue. Implications of IFRS, or International Financial Reporting Standards, the international equivalent of GAAP, on the Sprint SoftBank transaction or local GAAP and the many changes that have occurred since Clearwire was formed in 2008 is an issue for Sprint to address with their auditors and is not for us to comment on.

Turning now to the quarter. I want to review our progress on our 4 goals for 2012. Those goals are: First, to increase the cash contribution from our retail operations by a double-digit percentage; second, make significant progress in our LTE Advanced-ready network build; third, promote development of the TDD-LTE ecosystem; and fourth, grow the wholesale partner base.

We believe success in these areas is fundamental to realizing our vision of becoming a leading LTE provider in the United States. I'll provide an update on the progress we've made on each of these objectives, and then turn it over to Hope for a financial update.

I'm pleased to report that in the third quarter, we continue to make progress in achieving our objective of increasing the cash contribution from our retail operations by a double-digit percentage and remain ahead of plan on this metric. We continue to see strong results from the new no-contract retail offering, which has gained traction with consumers and most importantly, the retail business continues to have significantly positive impact on our financials.

Third quarter 2012 retail cash contribution increased approximately 40% year-over-year, primarily as a result of a combination of focused cost savings initiatives and a more efficient customer acquisition model. The significant improvement in retail cash generation under this model continues to support our decision to pursue a no-contract purchase offering, and we plan to continue optimizing this channel to be a meaningful cash source for the company in 2012 and beyond.

Against our second goal, we continue to make progress in our LTE Advanced-ready rollout during third quarter 2012. Notice to proceeds for LTE overlaid work increased to over 2,200 cell sites. And as I mentioned in my opening remarks, the collaborative efforts with Sprint on our network build continued.

Recently, we have had discussions on opportunities to better align our respective build schedules. Based on our determination of when Sprint expects to start utilizing Clearwire's LTE capacity, we have decided to adjust our LTE rollout to now target 2,000 sites on-air by the end of June 2013, while keeping content the longer-term goal of expanding our LTE network to up to 8,000 sites.

With more than 2,200 NTPs in hand, our sites are on pace to meet the 2,000 site target. In fact we already have sites fully commissioned with LTE awaiting connection to Sprint's core and expect the build activity to ramp in the fourth quarter to end the year with approximately 800 LTE commissioned sites.

We've told you before that many of our existing sites are LTE-ready. To this end, we are using our incumbent WiMAX vendors to add LTE in their respective markets in the initial phase of our LTE build. The exception is in the Motorola WiMAX markets where we plan to expand the use of Samsung in these markets.

As in the past, we will continue to employ a multi-vendor strategy and have selected Cisco and Ciena to be the brands of our network by providing the critical core and switching functions in our network.

In addition, we will continue to use Ericsson to provide our network maintenance services. While the revised plan pushes a portion of the initial sites beyond June 2013, Clearwire anticipates receiving the first quarterly installment of the Sprint LTE prepayment contemplated in our current MVNO agreement at the end of June 2013. We believe the current plan better matches the timing of our capital expenditures with expected revenue generation.

Turning now to our third goal. I'd like to update you on the development of the global 2.5 gigahertz TDD-LTE ecosystem, which is growing in acceptance around the world. As a founding member of the GTI, Clearwire continues to work closely with wireless chipset, device, infrastructure and carrier partners around the world to promote and develop the TDD-LTE ecosystem with an emphasis on expanding use of 2.5 gigahertz frequency as the de facto standard for global LTE use.

We believe the commercial and planned TDD-LTE deployments in major population centers in Japan, China, India, the European Union and Clearwire's own LTE deployment underway in the United States will continue to drive the ecosystem forward towards the critical mass necessary to realize tremendous economies of scale.

In fact, ABI Research recently estimated that continued aggressive rollouts of TDD-LTE networks would reach as many as 4.4 billion people worldwide by 2015. We are pleased to see 2 of our GTI cofounders executing on this vision with the February launch of SoftBank's TDD-LTE network in Japan where they have already amassed more than 350,000 customers in just 7 months; as well as in China, where China Mobile is building a 20,000 site TDD-LTE network, which they plan on expanding to 200,000 sites next year.

Recently, there has also been a major step forward in the growth of Band 41, Clearwire's chosen 3GPP band, with the Chinese telecom regulatory body announcing plans to release the entire 190 megahertz of their 2.5 gigahertz spectrum for TDD-LTE deployments and their adoption of the same Band 41 format advocated by Clearwire and other GTI members around the globe, including SOFTBANK MOBILE.

Additionally, SoftBank who launched their TDD-LTE network in Japan in February 2012 broke new ground with the recent introduction of 6 TDD-LTE smartphones that also support the 2.5 gigahertz band. We believe these developments further position Clearwire and our LTE wholesale partners to leverage significant economies of scale and innovation commensurate with the large global ecosystem of chipsets, devices and infrastructure equipment. Just as importantly, 2.5 ecosystem end customers will be able to use their devices in more places around the world than any other band.

Lastly, on the wholesale side. Our partners continue to launch innovative products, including FreedomPop's eagerly anticipated Freedom Sleeve for the iPod Touch and the iPhone. We believe inventive and disruptive models like these help drive our industry forward. And plan to encourage continued industry growth by lowering barriers to entry for startups like FreedomPop or more established broadband businesses such as recently signed EarthLink or NetZero, who would otherwise face significant obstacles to entering the wireless industry on their own.

Additionally, we continue to seek opportunities to partner with other large operators. We believe that current operators still need more capacity and that the wireless market will continue to attract established players and startups seeking an established, cost-effective and scalable means of competing in a number of industries.

I want to emphasize that we remain laser-focused on our goal of adding new wholesale partners. We continue to engage with numerous potential customers with a wide range of business plans designed to exploit the opportunity available today in mobile broadband.

With an average of 160 megahertz of spectrum in the top 100 markets, Clearwire has by far the largest supply of available capacity in wireless today. This enables us to offer greater capacity and faster speeds than our competitors by virtue of our fat pipes, a competitive advantage, which we intend to leverage further.

Now I'll turn the call over to Hope to discuss our financial results and outlook in more detail. Hope?

Hope F. Cochran

Thank you, Erik. 2012 represents a transition year for Clearwire as our focus shifts from WiMAX, our original growth engine, to LTE, our growth engine of the future. Heading into this transition period, we took calculated steps to secure our cash flows as WiMAX subscribers were expected to decline in advance of LTE subscriber growth.

First, we renegotiated our agreement with Sprint to move away from the usage-based revenue model of 2011 to a model where revenue is earned at a flat, fixed rate. Our primary goal was to achieve stable and predictable cash flows during the transition period, which we successfully achieved.

As a result, our third quarter results reflect our execution against our plan of managing the business for cash, while preparing for our next growth phase as a wholesaler of LTE capacity.

Cash burn was a low $26 million in the third quarter, and our ending cash balance was approximately $1.2 billion. The continued strong performance against our financial plan and the pacing of our LTE build has allowed us to raise our full year 2012 EBITDA guidance. And as a result, we anticipate ending the year with stronger liquidity than we originally planned.

In the third quarter, we saw revenues decline 6% year-over-year, driven by our lower wholesale revenue. Retail and other revenue of $197 million increased 1% year-over-year on a 2% increase in subscribers and higher equipment sales, partially offset by lower ARPU.

As anticipated, retail ARPU of $45.06 declined both sequentially and year-over-year as the mix of no-contract retail customers continued to increase. Total subscribers decreased as growth in our retail base was offset by subscriber losses in the wholesale business. Net subscriber losses were 468,000 in the third quarter, bringing total subscribers to 10.5 million at the end of the period.

The retail business delivered a solid quarter as growth additions increased 34% sequentially and 13% year-over-year to our highest quarterly total since the no-contract model was launched and underscoring the acquisition efficiency of our new retail model. As expected, given the higher mix of no-contract subscribers, retail churn increased both on a year-over-year and sequential basis to 5.1% in the third quarter.

Net of these effects, the retail business added 21,000 net new subscribers in the period, bringing our ending retail base to 1.4 million subscribers. We continue to be pleased with the performance of our retail business, and our year-to-date cash generation is well ahead of plan.

We ended the period with 9.1 million wholesale subscribers, down from second quarter by 489,000 on higher churn. Third quarter wholesale churn of 5.4% was higher on both the sequential and a year-over-year basis. We believe the subscriber and churn performance in the period are primarily attributable to Sprint's continued focus on non-WiMAX devices, which we expect to continue in the fourth quarter, given the launch of the iPhone 5 at the end of September.

However, I mentioned previously, due to the fixed nature of our WiMAX agreement with Sprint, WiMAX wholesale subscriber performance has become increasingly irrelevant, having no material impact on our revenue in the near term.

Switching to the expense side of the business. We continue to be pleased with our progress on managing spend. Cash operating expenses declined 7% year-over-year, representing an annualized run rate reduction of nearly $400 million or a remarkable 21% from our cash expense peak of first quarter 2011.

Over the past 18 months, we have reduced expenses throughout the business, primarily driven by the outsourcing of the call center and network management, transitioning to a new retail model, reducing tower leases and overall reductions in G&A.

As the LTE network comes on line, we expect cash expenses to increase modestly due to the incremental tower rents and utility costs associated with additional LTE equipment on our network.

During the third quarter, cost of goods and services and network costs, excluding noncash expenses of $26 million, was $186 million, a 4% increase year-over-year, primarily due to higher CPE cost of goods sold related to our new retail model, which sells rather than leases CPE devices to customers.

Cash COGS increased 7% sequentially, primarily due to higher CPE cost of goods sold, driven by higher retail sales and to a lesser degree, higher tower rents related to the early progress on our LTE build. Selling expenses for our retail business decreased by $15 million from the year-ago period despite higher sales volume, due to the new commission structure of our low-cost distribution strategy, as well as lower marketing expense, partially offset by higher equipment subsidies. As a result, retail CPGA declined 34% from a year-ago period to a record low of $191. Looking forward, we expect CPGA to decline slightly more in the fourth quarter.

We are pleased with the continued selling and marketing efficiencies from the new retail model and are well on our way to achieving low 200 CPGA for the full year.

G&A spend was down from the year-ago period, primarily due to lower call center expense and other targeted cost-cutting actions taken in 2011.

Now let's turn our focus to EBITDA performance. Third quarter's EBITDA loss of $38 million reflects an 18% improvement when compared to third quarter 2011 results. Sequentially, we saw a $4 million decrease in the EBITDA performance, primarily due to the decrease in revenue and higher cash COGS.

Capital expenditures were $34 million in the third quarter and consisted primarily of WiMAX maintenance and LTE deployment spend. The sequential and year-over-year increase in capital expenditures were primarily driven by the LTE spend.

Our LTE build intensified late in the quarter, and we expect LTE equipment purchases for the initial phase of the build to ramp even faster in the coming quarters. We are pleased by the strong financial support we received in finalizing equipment financing arrangements, which will fund the vast majority of our LTE equipment spend through classic equipment financing vehicles, with the bulk being treated as operating leases, which we expect to start impacting EBITDA in 2013.

Even though we are pacing our LTE build to better align with revenue generation, we continue to believe the total cost of equipment, construction and services for the larger LTE build of up to 8,000 sites to be approximately $600 million.

We expect the momentum in our retail businesses and our continued focus on expense management to positively impact our EBITDA results in the balance of 2012. Accordingly, we now forecast full year 2012 EBITDA loss of approximately $150 million to $200 million, representing a $25 million improvement at the midpoint to previous guidance of $175 million to $225 million. We continue to forecast full year 2012 revenue of $1.2 billion to $1.3 billion.

Based on our revised LTE build schedule, which Erik discussed, we now forecast full year 2012 capital expenditures of $125 million to $175 million as compared to guidance of $350 million to $400 million we provided most recently on our April call.

As a result of our guidance for higher EBITDA and lower capital expenditures, we expect to be in a stronger liquidity position at year end than we had previously planned.

From a liquidity perspective, cash at the end of the quarter was approximately $1.2 billion, $473 million more than the same time last year. The net cash burn of just $26 million reflects our continued focus on cash management, as well as a $38 million of working capital benefit from the Sprint payment, which exceeded the revenue recognized from Sprint.

Based on our current liquidity, our outlook for the operations over the near term and our current LTE deployment plans, we believe we have sufficient cash to fund the business for the next 12 months. As we consider our longer-term liquidity needs, we expect to receive LTE prepayments from Sprint in the future and continue to evaluate all potential sources, including strategic transactions, asset sales and capital market opportunities to meet our needs.

Our third quarter results continue to demonstrate that our focus on execution and preparing for future growth in culmination with the terms of the current MVNO agreements have extended our cash runway. We are closing out a strong 2012, and I look forward to reporting back to you on our continued progress next quarter.

With that, I'll turn it over to Erik for some closing remarks.

Erik E. Prusch

Thank you, Hope. Clearwire continues to play an important role in the development of 4G services in the U.S. and around the world. Domestically, our wireless spectrum portfolio places us in a position of strength in an industry where network capacity is the lifeblood of future growth.

Globally, we are helping to push the industry forward to develop both an ecosystem that offers significant economies of scale and integrate a widely adopted 4G standard that has the potential to provide one of the most seamless travel experiences in the history of mobile broadband.

The recent movements in our industry have only served to convince us even more that we are on the right path in terms of realizing the value of our spectrum assets and executing on our business plan.

In addition, when we consider the rising 2.5 gigahertz network roll-off plans around the world and the accelerating ecosystem advancements, we are even more certain that our band is in the sweet spot of global mobile broadband data, which against the backdrop of recent high advanced spectrum valuations in the U.S. as well as increasing forecast for demand of data with no near-term sources of meaningful spectrum, suggests our spectrum portfolio will only increase in value.

We remain focused on delivering a strong finish in 2012 and setting up the business for continued success in 2013. And our board and management team continue to be committed to delivering shareholder value and protecting shareholder interest.

Operator, we're ready for some Q&A. Can you please instruct the callers on entering the queue for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Walter Piecyk from BTIG.

Walter Piecyk - BTIG, LLC, Research Division

Just looking at the numbers on the balance sheet, looks like you're in a pretty strong position for the December interest payments. And also given you're cutting CapEx and kind of everything that's going on with the debt market, I was wondering, Hope, if you can give us an update on the balance sheet. On a refi basis, the debt markets are strong. Things change. I think there's an opportunity, you said, over the years you've been lost in the past on a refi or raising additional debt. Why not take advantage of that now? And if you're not taking advantage of that now, shouldn't that imply that there's another source of capital that is about to happen?

Hope F. Cochran

Yes, I appreciate the question, Walt. You're right to notice that we're in a strong cash position at the moment, and the debt markets are interesting, as well as we've had good movement in our debt recently. We continue to stay close to the market and watch our opportunities there. Clearly, I'm not going to speculate on what we're going to do in that regard, but it is something that we're well aware of and keep a watchful eye on.

Walter Piecyk - BTIG, LLC, Research Division

But as investors why shouldn't we look at this and say, "If you're not taking advantages of the financial market, that there's apparently another source of capital that's out there?"

Hope F. Cochran

Yes, I can't speculate on that. But we do stay very close to the markets and make sure that we are tracking the movements and what opportunities are there.

Operator

And our next question comes from the line of Anthony Klarman from Deutsche Bank.

Anthony Klarman - Deutsche Bank AG, Research Division

A few questions. I wanted to go back to the language that was in the press release and in the MD&A about better aligning the CapEx with the receipt of the LTE revenues. And I guess when you had announced the deal with Sprint, I thought that one of the whole points of that was you did have better clarity on what the receipt of LTE revenue was going to look like given that Sprint was committing to what, in effect, amounted to prepayments on the LTE network with those quarterly payments that you refer to. Could you just talk a little bit about what better alignment you're looking for in terms of the revenues? And is it revenues aside from Sprint than what they've already committed to that you're looking to get lined up before you go out with a more aggressive LTE CapEx number?

Erik E. Prusch

Thanks, Anthony. This is Erik. In terms of alignment with Sprint, that's what we're preeminently focused on. We want to make certain that we're building this LTE network in conjunction or in alignment at the relative same time that Sprint is introducing devices capable of using it. And what we know is the device schedule is we expect smartphones with 2.5 embedded in it in around the Q3 time frame; data devices earlier in the Q2 time frame. So what we're doing is pacing the build alongside with that. We clearly have to interoperate with their network, so we're going to make certain that we're bringing up our network at the same time that they're bringing up theirs, so that from a moke [ph] and framework, we can act seamlessly with them. This is prudent for us to do. It does preserve our cash, but it makes certain that we don't build well in advance of the revenue stream.

Anthony Klarman - Deutsche Bank AG, Research Division

Got it. And I guess my math could be wrong, but it would seem that if you sort of back of the envelope now, the build schedule between now and 2Q, you're probably going to fall short of what the original expectations were in terms of POP coverage under the revised Sprint agreement. Can you just remind us like what happens to those payments? Do they get prorated if you don't meet certain hurdles? Or do they just get pushed out until those hurdles are met on the -- with respect to the Sprint prepayments?

Erik E. Prusch

Yes. With regard to our MVNO agreement currently with Sprint, we are eligible to collect the same prepayments that we had planned for before, which really kick off after we deliver the 2,000 sites by midyear next year. So we're in complete compliance with that. We would expect to receive those prepayments in that period of time.

Anthony Klarman - Deutsche Bank AG, Research Division

Got it. But I guess maybe my question was more of like if you just look at the first payment, I guess what everyone was assuming was you just take the $350 million and you divide it by 4, and you're going to get that over 4, roughly, equal installments. If you're not yet completely ramped up to your original level, do those payments get prorated and just put on the back end, such that once you complete the build -- like you and Sprint have sort of picked all the cell sites, if it takes you longer to do that, does that push out the payments? Or do you get the payments on the same schedule at the same size anyway?

Erik E. Prusch

We get the payments on the scheduled contemplated. It is the $350 million prepayment divided by 8 equal payments. So it's on the same schedule that we have. We need to deliver 2,000 by midyear in order to start those prepayments.

Anthony Klarman - Deutsche Bank AG, Research Division

And one final question, I guess, since I have the chance. Just thinking about retail and the -- I guess the question is more of you're -- you've significantly lowered the acquisition costs on retail but there are still inherent other costs, there's some sales and marketing costs. And I guess how aggressively do you expect to push that even lower distribution channel while you're in a position of still sort of waiting to be in the mode where you're ramping up the LTE network because it still does consume some cash and some, obviously, management attention? Is there a concerted effort to perhaps not fully push the accelerator on that?

Erik E. Prusch

Actually, our retail business and the changes that we've made throw off cash to the business. So this is one of the fundamental transformations that we've taken this company through is we've developed a very efficient channel, selling to end customers and generating a significant amount of cash for the business. What we're doing in terms of making certain that we're more efficient in terms of our distribution in the channel is really identifying what are the ways that customers want to buy from us and being very focused on how we're delivering against that. Our movement from going from the 500 CPGA down to the low 200 CPGA has been all about that. We haven't sacrificed our growth plans. In fact, our growth this last quarter was fantastic in the retail business. And going forward, customers are not expressing a difference between LTE and WiMAX, so we still have the ability to continue to court those customers, continue to deliver a great level of service for them while we're going through this transformation plan.

Operator

And our next question comes from the line of Michael Funk from Bank of America.

Michael J. Funk - BofA Merrill Lynch, Research Division

So a couple of questions here. I mean, first, are you engaged in a process to sell spectrum today? Then I guess second, is there [ph] the equityholders' agreement or other agreements that prevents you from swapping excess spectrum for outstanding debt to reduce your leverage in your cash burn profile that you have? And then, I guess as a final question, the decision to slow down the network build, how does that impact your potential to sign new wholesale agreements?

Hope F. Cochran

Yes. Thanks, Michael, I appreciate the questions. I'll address some of the spectrum questions, and it's a great question. It was a fairly complicated question, so bear with me a little bit. But in regards to the selling of spectrum, absolutely we have the ability to sell spectrum. Now there are things that we need to watch and be governed by, but those have not changed based on the events of the last 2 weeks. Now you specifically asked about a debt swap for spectrum. You have to look at then how the debt would handle a spectrum sales versus -- and our ability to sell spectrum. If we were to sell spectrum, we can use the proceeds to pay back debt and it would need to go to all of the debtholders equally within that class, so we would need to be careful of that. But I do think there is opportunities to work through some sort of reduction of debt with a spectrum sale.

Michael J. Funk - BofA Merrill Lynch, Research Division

And as a quick follow-on, Hope, could you remind us how much of your spectrum you consider to be excess? I know in the equityholders' agreement there are different qualifications for what you can sell with and without certain votes.

Hope F. Cochran

Yes, absolutely. So excess is basically defined as what we need to operate our current business. And that's something that we just watch. And as we look at what our current business plan is, it's something that we evaluate. As you know, Michael, we hold 160 megahertz of average in the top 100 market, so we do feel like we've got a very deep portfolio of spectrum when you look at our current business plans.

Erik E. Prusch

It's just the inverse. It's what we don't need in our current business plan.

Hope F. Cochran

Yes, that's fair.

Erik E. Prusch

And, Michael, as far as your third question around slowing down the network builds and whether it impacts our wholesale customers. I think it's just important that we get the network built and show the capability of it. We think that as we get closer and closer to getting the network built, we will be able to attract additional customers to it. I don't think that's a significant event for us. Clearly the number of sites that we have will have a direct relationship to -- at the amount of revenue. We're not changing the overall plan. The overall plan is still to get to 8,000 sites, but it's the initial tranche that triggers the prepayments that we're myopically focused on, and from there we'll take it further.

Operator

And our next question comes from the line of Jonathan Schildkraut from Evercore.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

I was wondering if you could give us a little bit more color about the equipment that you've deployed at this point. You pointed to 800 sites coming up by year end. I just wanted to get a little better sense of what's actually out in the field and on the towers.

John C. B. Saw

Jonathan, John Saw here. Like we said and what Erik said, we do have 2,200 notice to proceeds. What it means is that we have permission now to do the upgrades at our existing sites. So the initial phase of our build is -- it involves upgrading the WiMAX equipment to add LTE to it. In a lot of the sites, it's a matter of adding line cards on the ground units and then refreshing the software, and that's what we have been very focused on.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

Great. I had read that SoftBank was expecting a TD-LTE device by the end of this year. In your prepared remarks, you guys indicated that data devices would be available during the course of 2013, but you were looking at 3Q before you got a device. Just wondering if it's a question of some of the other U.S. spectrum bands or if there's some other reason why there'd be a delay.

John C. B. Saw

I think with regard to devices on our network, it is Sprint that is developing devices that will support TDD-LTE. I think they would be in a best position to address dates as to when they're available. I think they did emphasize that there will be devices, first with data devices and then smartphones supporting our spectrum band starting next year. With regards to SoftBank, I think they have already released data devices in the form of personnel hotspots early this year. And recently a few weeks ago, they have now announced the launch of 6 smartphones that support 2.5 gigahertz band.

Jonathan A. Schildkraut - Evercore Partners Inc., Research Division

Great. Is there any color on the performance of those devices in terms of speed?

John C. B. Saw

I think if you look at the marketing material that SoftBank has been using in Japan, they have been advertising some tremendously fast speeds, 110 megabit per second, for their TDD network, which actually exceeds their own FDD network. I actually -- my engineers have actually been testing some of the devices here and we have been very impressed with the performance of these devices.

Operator

And our next question comes from the line of Donna Jaegers from D.A. Davidson.

Donna Jaegers - D.A. Davidson & Co., Research Division

A few questions. First, Erik, you mentioned that John Stanton's seat could be changed. Can you go in any other color on that? Obviously he's Sprint's -- or he was -- he's Sprint's representative on the board, right?

Erik E. Prusch

He's actually an independent board member, and he was designated by Sprint to fill that seat. And clearly, as Chairman of the Board and kind of the wireless pioneer that John is, he's indispensable to the company and very valued. So yes, Sprint controls 7 seats on the board, one of which is currently filled by John Stanton.

Donna Jaegers - D.A. Davidson & Co., Research Division

Clear as mud. So onto the next question. On the equity -- according to equityholders' agreement, you guys can sell some portion -- well the question is, I guess, what portion of spectrum or how much of book value could you sell without getting -- without having to ask the board?

Hope F. Cochran

Yes, a great question, Donna. And one, again with multistep answer. So as you indicated before, clear as mud, we'll try and work through it. But in general, we do have a good ability to sell spectrum. Some of the ratios that we look at is if it's 20% more than our assets and our assets are about that $8 billion number, then it requires a larger vote by the board, meaning 10 out of 13, meaning if it's less than 20%. So that's really the mark we look at now. I'm not sure that we worry so much about the 10 votes versus the majority. As we indicated earlier, our vote -- our board is primarily all independent right now, so that has not posed a problem. But that is the ratio that we watch.

Donna Jaegers - D.A. Davidson & Co., Research Division

Okay, and then one last question. Obviously your spectrum is tremendously valuable and a lot of companies or a lot of other wireless players right now in the U.S. are looking for good backhaul opportunities to small sites where there's not fiber to them and there's not really the opportunity to put fiber into the small sites in the near term. Have you guys -- I know you're providing your own backhaul with your -- with spectrum. Have you looked at other backhaul opportunities that you could do with your spectrum?

John C. B. Saw

Donna, John Saw here. I think you did hit the small cell problem on the head. The backhaul is indeed the big challenge. And yes, we have looked at opportunities of how we can help with the backhaul opportunity, and it all comes down to really the business case. We can certainly support in-band backhaul with a vast spectrum resources we have, but we also want to be opportunistic in a sense that are we better off in terms of leveraging our spectrum for access where we have a growing global ecosystem supporting it now? Or do we want to dedicate it for in-band backhaul for small cells? I would say that's a good problem to have. I think we're working through all the pros and cons, but certainly it is an opportunity.

Operator

And our next question comes from the line of Shing Yin from Guggenheim.

Shing Yin - Guggenheim Securities, LLC, Research Division

I wanted to follow up on the LTE sites target of 2,000 by middle of next year. I think that's down from the original target, which was 5,000. And you said you will continue to get the Sprint prepayments despite their lower target. I guess I'm just trying to understand, in your opinion, from Sprint's perspective, why would they agree to that, especially given what we heard from them this morning that their Network Vision rollout is delayed? It seems to me they should be interested in having as many of your TD-LTE sites up as early as possible. Even if they don't think there will be devices that early, but still just to have the capacity out there and if they're still going to continue to give you those prepayments, I just wondered why they would agree to pulling back on the deployment schedule.

Erik E. Prusch

Yes. I mean certainly, we're working very collaboratively with Sprint, and they've agreed to the same schedule that we're on. We can't speak for Sprint, but what we can tell you is our network had to fundamentally interface with their network. We have to interface with their core. So the timing of our network is greatly dependent on their network being up and ready to go and making certain that we can take advantage of this build. So the timing is collaborative. We're working on the same schedule with them. We're in constant dialogue with them and we're going to bring up the network at the time that they need the network with the devices that they're scheduled to bring.

Shing Yin - Guggenheim Securities, LLC, Research Division

Actually that helps. If you don't mind, I have kind of a related question. You mentioned earlier that China Mobile in China is planning to build out a similar network on TD-LTE and they are planning to put out 200,000 cell sites. I just wondered why do they need so many sites? I think the typical U.S. national carrier with national coverage has maybe 1/4 as many. Can you kind of comment on what's driving the 200,000 sites number for them?

John C. B. Saw

Shing, this is John Saw here. China is a big country with a lot of people there. And I think in terms of carrying all the population and providing the level of service, traditionally, they do have a lot more cell sites than in the U.S. I think you need to go check the numbers, but China Mobile today actually has more than 400,000 cell sites. And what they've committed to is that 200,000 of those sites will have TDD-LTE operating next year.

Operator

And our next question comes from the line of Ric Prentiss from Raymond James.

A couple of questions. First, on the change to the 2,000 from the 5,000, obviously a common question. Hope, you mentioned you have cash funding now for the next 12 months. Does that imply that you'll go -- or does that include the ability to go beyond the 2,000 cell sites in the middle of -- second half of next year?

Hope F. Cochran

Yes. Thanks, Ric. As we think about 2013, we haven't given guidance for 2013. We are pleased with where our liquidity position is today, at $1.2 billion in cash, and look to that milestone of hitting 2,000 sites by June of 2013. We'll continue to work towards the 8,000 sites after the 2,000 sites. We just haven't given timing on that at this point.

And as far as how the 2,000 was picked, I think you mentioned, obviously, there has to be a lot of collaboration, connection, interoperability between yourself and Sprint. The 2,000 sites, is it -- was it just a reduction in the number of markets? Is it less size per market? Just trying to think of how you kind of carved it from 5,000 to 8,000 back to 2,000. Is it less markets? Or is it just less sites in the market that you wanted to get out there?

John C. B. Saw

Ric, John Saw here. So I think with the LTE business model that we have, we are focused on hotspot, hot-zone sites with the greatest need for capacity. And so it's not so much cutting out markets or prioritizing markets. We work very closely with Sprint to identify the sites with the greatest need for capacity, and that's how we have prioritized all our sites with Sprint.

Yes. So again, as far as hotspots that's obviously -- this is a very attractive product. But would you say there were markets that were shifted out? Or is it just you wanted to get a certain number in the market to test that? I'm just trying to gauge, is it that markets slipped out or just number of sites per market that slipped out? Is that possible to let us know that?

John C. B. Saw

I think we are focused on those sites that has the most demand for capacity. We didn't look so much at the markets. We are filling up sites in numerous markets all at the same time, and we're turning them up in the order at which we see the capacity -- what the capacity needs are.

Okay. And I guess final question on the 2,000. As you think about -- I think you mentioned Motorola was a little bit more of an issue trying to upgrade those. Did you prioritize the 2,000 sites maybe by the vendors to get the easier upgrade ones identified? And as we think about the cost, Hope, you mentioned $600 million is still the thought for 8,000 sites. Is 2,000 sites 1/4 of that number, $150 million? Just to kind of help us think through the math.

John C. B. Saw

So clearly, we do days effective in terms of how fast we can turn the sites up. There's a lot of sites we have today that simply required a line card and a software upgrade. And those are the ones that -- a lot of those ones are coming up first. With regards to the Motorola markets, we do require more work in those sites, and they will be coming up at later stages. In terms of where the capital spend goes to, obviously the more highway you put up at the site, it would cost you more. So it does scale proportionally. With the software sites, it will be a lot lower cost. But we have not given detailed breakdown at this moment.

Operator

And our final question comes from the line of Phil Cusick from JPMorgan.

Philip Cusick - JP Morgan Chase & Co, Research Division

So first on the equipment financing, can you quantify how much that is and what the sources are? Is that sort of your headline vendors? Or is there some other source?

Hope F. Cochran

Yes, absolutely. So, Phil, we talked about the 8,000 sites being about $600 million in total. And of course that is comprised of equipment, but also construction and services, zoning, permitting, et cetera. So when we think about equipment financing that clearly pertains to the equipment portion of that $600 million. And you can look at that to be about 1/2, a little less than 1/2 in regards to equipment. Now when you look at equipment financing, that usually comes in the range of 70% to 80% of what you purchase, so that's how I would size the total amount of financing that we will be looking at. In terms of where it's come from, I mean, literally, as we negotiate with our vendors and as part of the negotiation process and something that we've done historically and we continue to do in this process, sometimes it came directly from the vendors, sometimes it came from a third-party. But we've got several different agreements alongside those contracts that we will be accessing as we purchase equipment for the build.

Philip Cusick - JP Morgan Chase & Co, Research Division

And what kind of rates do you expect to pay on that?

Hope F. Cochran

They are varied. And we're not discussing them individually, as clearly we had different negotiations with different vendors. But they are, as I indicated, varied, and I would say mostly at market if some below.

Philip Cusick - JP Morgan Chase & Co, Research Division

So market as in your sort of current interest rates?

Hope F. Cochran

As I indicated, they're very different. So some are below market and some are more at market.

Operator

Thank you. And this concludes our question-and-answer session. I'd like to turn the conference back to Clearwire Corporation for any concluding remarks.

Erik E. Prusch

With that, we're going to bring the call to a close. Thank you all for taking the time to listen and to participate.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.